Big Tech's AI spending surge
Speakers
Deirdre Bosa
— Anchor/Reporter, CNBC Tech Check
Summary
CNBC's Deirdre Bosa discusses the surge in Big Tech AI capital spending, noting Alphabet, Microsoft, Meta, and Amazon are expected to spend a combined $600 billion this year. She argues this makes them more like asset-heavy utilities, which could shift valuation metrics from revenue growth to return on invested capital and compress multiples. She also warns they are spending ahead of demand on AI use cases that do not fully exist yet, a different risk profile from the earlier cloud buildout.
- Big Tech AI capex is expected to rise to a combined $600 billion this year.
- Capex at Alphabet, Microsoft, Meta, and Amazon has grown more than fourfold since 2023.
- Deirdre Bosa says Big Tech is building an AI compute grid that customers will rent.
- She argues their economics may resemble asset-heavy utilities, shifting focus to ROIC.
- She warns capex could crowd out buybacks and compress valuation multiples.
- She notes spending is ahead of demand, unlike the earlier cloud buildout.
- The segment also mentions a Morgan Stanley desk note referencing Claude and a Monday.com-like tool.
Ideas
Big Tech becoming utilities may compress multiples
Deirdre Bosa argues that Alphabet, Microsoft, Meta, and Amazon are becoming asset-heavy utilities because they are expected to spend a combined roughly $600 billion in capex this year to build an AI compute/intelligence grid that customers will rent, much like electricity. She says this shifts their economics: multiples could compress, capex crowds out buybacks, and the key metric shifts from revenue growth to return on invested capital. While their margins are better than traditional utilities, they are spending ahead of demand on AI use cases that do not fully exist yet, a different risk profile than the earlier cloud buildout when customers were already paying. She therefore sees them as potentially overvalued—software scales more easily and trades at roughly double the ~16–17x earnings multiple of utilities—and thinks their valuations may come down as they become more essential and asset-heavy.
